Judiciary Committee Music License Hearings Underway, Radio Under Fire To Pay More

June 10, 2014 at 9:16 AM (PT)

"Music Licensing Under Title 17 Part One," the first of two House Judiciary Committee hearings on music licensing, is under way TODAY (6/10) in WASHINGTON D.C. at the RAYBURN House Office Building.

Congressman JERROLD NADLER (NY), the Ranking Member of the House Judiciary Subcommittee on Courts, Intellectual Property and the Internet, delivered an opening statement, saying, “With colleagues on both sides of the aisle, I am developing legislation to address the various problems in existing law in one unified bill -- a music omnibus, also known as a ‘MusicBus’ -- bringing fairness and efficiency to our music licensing system, and ensuring that no particular business enjoys a special advantage against new and innovative technologies,” said NADLER. “Consumers don’t know that the button they push on their car dashboard or smartphone arbitrarily determines how much artists and songwriters will be paid, assuming they will be paid at all. We can create a better system for radio competitors, for artists and songwriters, and for fans, all of whom depend on a vital healthy market for music and music services.”

NADLER added, “It is often said that if we started from scratch, nobody would write the law the way it stands today. Music copyright and licensing is a patchwork of reactions to changing technologies. From the development of player pianos and phonograph records to the advent of radio and the Internet, the law is constantly playing catch up, and quite often failing," and continued, “Last Congress, I circulated draft legislation, the Interim FIRST Act, to establish parity among all digital radio services. The Songwriter Equity Act, recently introduced by Representatives COLLINS and JEFFRIES, would similarly modernize the law to ensure that the same ‘willing buyer, willing seller’ standard governs songwriter and music publishers’ mechanical reproduction royalties."

Mentioning terrestrial radio, NADLER said, “Of course, one of the most glaring inconsistencies and injustice is that our performing artists, background musicians and others rights holders of sound recordings receive absolutely no compensation when their music is played over-the-air on terrestrial -- meaning AM/FM -- radio. Congress required payment when sound recordings are transmitted digitally in 1995, but we have yet to extend this basic protection to artists when their songs are played on AM/FM radio. This is incredibly unjust. The bottom line is that terrestrial radio profits from the intellectual property of recording artists for free. I’m aware of no other instance in the U.S. where this is allowed, and it needs to be remedied. We are on a short list of countries that includes IRAN, NORTH KOREA and CHINA that do not pay performing artists when their songs are played on the radio. And when American artists’ songs are played in EUROPE, or any other place that provides a sound recording right, these countries withhold performance royalties from American artists since we refuse to pay theirs."

Ranking Member JOHN CONYERS, JR. (D-MI) addded, “There are several important things we should address during today’s hearing and the hearing later this month. First, as we discuss the various issues presented by these technological developments, it is essential that we consider the potential impact that our decisions will have on creators so that we can ensure that they are not adversely affected by any decisions that we make. Among other things, this is true for the process by which royalty rates are set. That process should be inherently fair and competitive. We will hear from some of the witnesses today that the current process is unfair and that, as a result, the royalty rate does not provide creators with a fair market value for their work. For example, the current rate structure for determining songwriter royalties prohibits introduction of evidence of the rates that performers obtain when music is played over digital radio. This is one possible arena for legislative change and my colleagues -- Representatives COLLINS and JEFFRIES -- have introduced The Songwriter Equity Act to fix this particular problem. I would like to hear the witnesses discuss that particular fix and what additional changes, if any, should be made to the current royalty system to address their concerns."

CONYERS continued, "As everyone here knows I am a strong supporter of artists and believe that the current compensation system on terrestrial radio -- by which I mean AM and FM radio -- is not fair to artists, musicians or the recording labels. When we hear a song on the radio, the individual singing the lyrics or playing the melodies receives absolutely no compensation. Every other platform for broadcast music -- including satellite radio, cable radio, and Internet webcasters -- pay a performance royalty. Terrestrial radio is the only platform that does not pay this royalty. This exemption from paying a performance royalty to artists no longer makes any sense and unfairly deprives artists of the compensation they deserve for their work."

PORTNOW testified, "There are many serious discussions about music royalty rates today: which are too low, which are too high, and what is fair. Yet AM/FM terrestrial radio broadcasters continue to deny musicians any right whatsoever to performance royalties for the use of their music, which radio giants use to make billions in annual advertising revenue. Terrestrial radio is the only industry in AMERICA that’s built on using another’s intellectual property without permission or compensation. Broadcasters in every other developed country in the world compensate performers. The result is that the U.S., which should be the standard bearer for intellectual property rights, is among such countries as CHINA, NORTH KOREA and IRAN which do not recognize these fundamental rights. THE NATIONAL ASSOCIATION OF BROADCASTERS (NAB) has spent a lot of money lobbying to maintain their free ride. During each session of Congress, they spread myths that never stand up to any reasonable assessment of the facts."

MILLER added, "The current system is unjust and must be changed. Rules established in 1909, largely to prevent one player piano roll company from becoming a monopoly, require me to grant a compulsory license paying 9.1 cents for the sale of a song, which I split with my co-writers and our music publishers, regardless of what the marketplace might say my song is worth. That’s not much of a pay raise from the original two cents paid in 1909. Royalties from my song performed on an Internet radio station are set under consent decrees from World War II. The judges who determine those rates are forbidden from considering what the marketplace says my song is worth. Consequently, I only receive thousandths of a penny for those performances."

Radio is noticably absent from this group, although NAB Joint Board Chair CHARLES WARFIELD, SIRIUSXM VP/CFO DAVID FREAR and PANDORA General Counsel DELIDA COSTIN will represent radio at the JUNE 24th hearing.

NAB: Radio Pays Plenty Already

NAB EVP/Communications DENNIS WHARTON offered the radio perspective in the NY POST:

“Local radio provides an unparalleled platform for record labels and recording artists to our 240 million-plus listeners every week. That exposure results in record sales of between $1.5 million and $2.4 billion annually, and has jump-started and sustained the careers of countless musicians. Currently, local radio pays $330 million a year to songwriters, and millions more to record labels and artists when we stream music. Saddling radio stations with millions of new fees would either drive music-playing radio to all-talk formats, or would force many stations to go dark.”